Condo nation? U.S. housing recovery fueled by renters

WASHINGTON (MarketWatch) — Part of the American Dream long included owning your own home. But after a nightmarish recession and an agonizingly slow recovery, millions of people have chosen to rent instead.

The long-awaited rebound in the long-suffering U.S. housing market tells the story.

Construction on new homes rose in July at the fastest pace since October 2007, two months before the start of the Great Recession. Yet the explosion in new construction has been fueled by surging demand for apartment buildings, condo complexes, townhouses and other multi-unit projects aimed at satisfying the needs of renters.

Since the housing market bottomed out in April 2009, construction on multi-unit projects has skyrocketed 466%. Work on single-family homes, which historically have accounted for the bulk of new housing, barely doubled over the same span.

What’s more, the percentage of multi-unit buildings under construction has risen to a 29-year high of about 35%, government figures show. Shortly before the onset of the last recession, they only accounted for about 20% of all new housing stock.

The desire to rent can be seen through home-ownership rates collected by the U.S. Census Bureau. The percentage of Americans who owned their own homes at the end of the June fell to 63.5% — the lowest level since the government started to keep track in 1980.

Just 10 years earlier in 2005, the home-ownership rate had climbed to a record 69.2%, the product of intensive efforts by presidents George W. Bush and Bill Clinton to help more Americans buy their own homes.

In retrospect most industry experts believe the government’s efforts were misguided, contributing to arguably the worst boom and bust cycle in U.S housing history.

Home-ownership rates have tumbled so dramatically that Canada, the nation’s neighbor to the North, now easily exceeds the United States. Canada’s home-ownership rate is nearly 70%.

Maybe that’s not a good thing, either. Many economic experts in Canada fear the country is experiencing an unsustainable boom that is pushing prices to excessive levels and potentially setting up a housing crash similar like the one that took place in the U.S. almost a decade ago.

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